Sunset Media Tower, where the House of Blues has its offices, could be the newest addition to Kilroy Realty Corp.’s large L.A. real estate portfolio, according to sources with knowledge of the talks.
Owner USA Sunset Media Management, an L.A. real estate investment firm, is in negotiations with the real estate investment trust to sell the 22-story building, which it bought for $82.5 million in 2005. Financial details of the negotiations were not disclosed.
The 321,000-square-foot 6255 W. Sunset Blvd. property at the corner of Vine Street is 83 percent leased. Among the tenants are the AIDS Healthcare Foundation, a Comerica Bank branch and, on the ground floor, the Waffle restaurant.
Kilroy, headquartered in West Los Angeles, owns 25 L.A. office buildings, including 12200 W. Olympic Blvd., a new-media property where online video service Hulu and comparison-shopping site Shopzilla Inc. are tenants. Its portfolio of 109 office buildings in California and Washington spans 11.8 million square feet.
Sunset Media Tower would be Kilroy’s fifth acquisition this year. It has so far spent $381 million acquiring 1 million square feet along the West Coast from San Diego to Seattle.
Kilroy’s target, the sources said, is to acquire five additional properties by the end of the year, including two in San Francisco. The acquisitions are expected to top $400 million.
The pickups are being funded by a mix of equity, unsecured debt, mortgages and other financing. The REIT raised $221 million in an April secondary offering of more than 6 million shares priced at $38.25.
Prior to this series of executed and planned acquisitions, Kilroy historically developed most properties in its portfolio. However, the sources said, depressed prices for quality buildings in the current market have caused it to reconsider that strategy.
In the first quarter, Kilroy’s funds from operations, a key REIT metric, were up 14 percent to $30.1 million and revenue rose 25 percent to $88 million. However, Kilroy’s funds from operations of 55 cents per share missed by 2 cents the average expectations of analysts polled by Thomson Reuters.
Shares closed at $38.30 on June 23, down 2 percent for the day but up nearly $2 since the beginning of the year.
Kilroy declined comment.
CB Richard Ellis Group Inc. brokers Robert A. Waller, Tina Lee and Patrick Amos, who represent USA Sunset Media, did not return calls or e-mails for comment.
Vertical Expansion
Lockton Insurance Brokers has decided to stay in downtown Los Angeles after searching countywide for new offices.
The Kansas City, Mo.-based company, the third largest insurance brokerage in Los Angeles, signed an eight-year lease for nearly 72,000 square feet in the Ernst & Young Plaza at 725 S. Figueroa St. The deal is valued at $19.5 million.
The brokerage occupies three full floors at the building, owned by Brookfield Properties Management, and with the new lease has reserved the option to expand to yet another floor. The company moved into the 35th floor in 1995, expanding to the two floors above it over the next decade.
Lenny Fodemski, Lockton’s downtown managing director, said the firm’s employee base is rapidly growing and will need more room in the near future. The company scouted offices in Culver City, Glendale and the South Bay, but the benefits of downtown were too strong for the company to break its ties.
Employees live as far away as Ventura and north Orange counties, so downtown’s central location and accessibility by public transportation were important, he said.
Also, Ernst & Young Plaza is in proximity to other insurers and brokerages, including Aon Corp., American Insurance Group Inc. and Marsh & McLennan Cos.
“It’s great to meet someone face to face for lunch one block from the office,” Fodemski said.
Jones Lang LaSalle Inc. Managing Director Tony Morales, Senior Vice President Christina Noonan and Senior Associate Maureen Hawley represented Lockton. Brookfield was represented in-house by John Barganski.
Staff reporter Jacquelyn Ryan can be reached at [email protected] or (323) 549-5225, ext. 228.
